The cryptocurrency market is a hot topic nowadays and one of the most important things to know about it is that it doesn’t forgive even an honest mistake. If you make a lot of mistakes in a short span of time, you will not be able to get back to crypto trading again. There are plenty of people out there who have made fortunes in the crypto market and those who have lost it. To end up in the former category, you need to learn the common crypto trading mistakes beginners make and figure out how to avoid them. What are these? Check them out below:
- Starting with real money
The first mistake that beginner crypto traders often make is starting with real money. Why do that when you have the option of using a demo account and paper money for getting in some practice? The crypto market for many currencies such as Altcoins, Bitcoin, Ethereum, etc. is far more volatile than the other markets out there and you need to hone your skills before you risk your money.
- Not using stop loss
You obviously want to manage your risks when you start crypto trading and stop losses are the Holy Grail. They can help you minimize your losses when your trade goes south. It doesn’t matter how confident you are about a trade moving in the direction you anticipate, not using a stop loss would be egotistic. It is not something you should do when you are trading in a market as volatile as cryptocurrencies. The stop loss feature is offered by nearly all exchanges, so you will not have a problem in using it.
- Paying high trading fees
If the brokerage fee is too high, it can end up eating a significant portion of your trading profits. The key is to find a broker that charges a lower fee for trading and offers you high liquidity and volume. Yes, there are brokers like these and you will have to do some research in order to find one.
- Not doing fundamental analysis
A lot of people who are getting started choose a popular crypto and start trading it. There is a possibility that you will be able to make some good money for a prolonged time, but a single loss could end up destroying your entire portfolio. Performing fundamental analysis of the crypto is the best way to avoid this scenario. This means you need to understand the potential of the crypto, its management team, future outlook and the token economy.
- Not keeping a trading journal
There are hundreds of crypto trading beginners out there who make this mistake and pay for it during their blockchain career. If you make the effort of writing down why you are making a trade and later analyzing it can help you figure out what helped some trades to be right and why you lost some of them. This can go a long way in helping you improve your strategy and minimizing your mistakes, which can result in profits in the long run.
- No trading plan
You have to have a trading plan ready before you enter any trade. This means that you need to know your entry and exit points, the amount of capital you want to invest and the maximum loss you are ready to accept from the trade. If you don’t have a plan before you open a trade, you could end up suffering from significant losses.
- Revenge trading
This usually happens when people let their emotions get in the way of crypto trading. It is a mistake that you need to avoid at all costs. Revenge trade happens when you have made a losing trade and out of frustration and fear, you immediately enter into a new one without thinking things through. You may take greater risks in order to recoup your losses and end up doubling them because you didn’t take enough time to do your research and then make a decision.